Conduit Quiz: Labor Force Participation vs. Unemployment

There are two key numbers considered when analyzing the Economy and its growth. The most widely used number is the unemployment rate. While this is a somewhat effective measure of how the economy is doing in a given area, the better rate to look at is the labor force participation rate.

The labor force participation rate is calculated by dividing the labor force by the population of workers over the age of 16 in a given area. Someone is considered “in the labor force” if they are either employed or looking for a job.

In Arkansas, the population is just over 3 million people. The labor force is just 1,345,646 people, as of September 2018. The labor force participation rate in Arkansas is 57%. This essentially means that of the working age people, just 57% are involved in the workforce by either having a job or looking for a job. Arkansas ranks 46th in the country in this measure.

The unemployment rate is calculated by dividing the number of unemployed persons by the labor force number. Therefore, any person not seeking employment is not considered in the unemployment number.

In Arkansas, while the unemployment rate is at historic lows, the labor force participation rate is also going down. This means that the unemployment rate is not necessarily going down because people are finding jobs, but instead are not looking for jobs and leaving the labor force altogether.

From September 2017 to September 2018 over 12,000 fewer Arkansans were in the labor force. For September 2018, Arkansas’s labor force participation rate was just 57.4%, down 1 percent a year ago and down 6 percent from a decade ago. This makes Arkansas’s labor force participation rate 4th lowest in the country.

Dr. Michael Pakko, an Arkansas economist, joined Paul Harrell on Conduit News Radio this week to discuss the Arkansas economy and the differences in the unemployment rate and the labor force participation rate. You can watch that interview below.